‘Might not recover’: The struggle businesses are having to pay back pandemic loans

As Thursday rolls around, hundreds of thousands of Canadian businesses and non-profits will reach the repayment deadline on any outstanding debt from federal government loans received through the Canada Emergency Business Account (CEBA) program during the pandemic.

Up to one-third of the maximum $60,000 will be forgiven if a business is able to pay back its remaining balance by today, otherwise the loans will be converted to three-year term loans with a five-per cent annual interest rate.

Marc Légèr, owner of the Laundromat Espresso Bar and the Notre dame de Parkton sandwich shop in Moncton, said he needed the $60,000 CEBA amount “quite urgently” when COVID restrictions forced his businesses to temporarily close in the spring of 2020.

“I was wondering how I was going to stay afloat during COVID and it really helped out for the time being,” he said, admitting that his experience was a “hard go” for a bit.

Fortunately for Légèr, he was able to complete his $40,000 repayment prior to the Jan. 18 deadline, therefore the remaining $20,000 of his loan was forgiven by the federal government. But he wasn’t able to raise these funds without making sacrifices, as he had to sell some vacant lots that he originally purchased as part of a retirement plan.

“My pay was just going back towards rent and (being in) survival mode,” he said. “After two or three years of being open, I was able to make that payment.”

He said in addition to selling his properties, all of his business’ profits have gone towards paying back his loan.

“For me to take $40,000 out of my bank account, that was my salary. That’s the profit of the business and now I’m back down to zero,” he continued, adding that he now is without any form of “emergency fund” due to the pressures of repaying his loan prior to the deadline.

“That $20,000 that we got as a ‘freebie’ that a lot of people think, it didn’t go to me, it went to pay for the rent. It’s to keep businesses afloat, no one made a profit off of this.”

Légèr said his bar was amid an expansion when the first wave of COVID hit, which caused him to close up for more than a year.

“Business was really cruel the first year. Everybody was still charging us for everything … that $60,000 was just there to cover that for a bit until the government did come and help with rent subsidies and employee pay, but it took a while for those programs to come into play. So that money up front was just to make ends meet,” he continued.

“I could’ve lost everything in the first two months.”

Looking ahead, the Moncton business owner, who’s owned the downtown bar and cafe for nearly two decades, remains optimistic about his business prospects after surviving through a challenging economic period.

“Eventually, I’ll get back on my feet but this urgent payment of $40,000 after just a couple years of being back open in this marketplace that we have to play in, it’s really hard,” he said.

‘100 per cent off’ repayment

However, not every business owner has been able to access enough funds to pay the amount back in time.

Saf Haq, co-owner of the Tart and Soul Cafe in Halifax, said she won’t be able to make the repayment — and refinancing isn’t an option due to existing debt.

“We are 100 per cent away from the goal, so we won’t be paying back any of the $40,000,” she said, adding that her cafe opened in a new space on March 13, 2020, right before Nova Scotia went into a state of emergency.

“Our expenses went up astronomically … we hadn’t accounted for what COVID would do to all of us. We expanded, we had to shut down immediately, so we needed the CEBA loan to cover the expansions that we had.”

Despite attempting to adapt to the unexpected changes by offering home delivery services, she said the funds were needed to cover operating expenses at the time as the business’ rent had tripled due to the expansion.

“We took the CEBA loan and basically it was gone immediately. Our rent is many thousands of dollars so a loan of $60,000, which seems like a crazy amount, doesn’t even cover our rent for a year. We used all that money, there was no saving or setting of it aside.”

Haq said business is still yet to return to the pre-pandemic levels that she experienced prior to 2020, describing herself as “100 per cent off” of being able to repay the federal government’s loan.

“There is nothing set aside that we can put towards it,” she said.

“We are feeling like our hands are pretty tied in general. Some of the recommendations were asking friends or family to loan you some of the money and we’re not really in a position to be doing that.”

Haq said that her business is actively paying off interest stemming from bank loans that were received to assist with the cafe’s expansion prior to the pandemic, along with other amounts owed to the CRA.

“The monthly debt repayment that we have coming out of our account just puts us behind further,” she continued. “It’s really hard to catch up even when our gross revenue is actually good. It’s just hard to get ahead when you started so far behind.”

Haq said she’s gone further into debt by using personal funds to purchase ingredients and taking a pay cut to ensure her small staff continues to be paid adequately.

“We have to pay ourselves a little, but I personally have gone further into debt from when we started because sometimes the groceries have got to go on my credit card … it’s pretty rough,” she said, adding that as of right now, bankruptcy isn’t something they’re considering.

“I think a lot of the time when people think of business owners, they think of someone at home raking in the profits from the business. Obviously, we’re in this position because we opened a business, and it’s a privilege to do that … but I think it’s important for people to know that small business owners are still struggling from the peak pandemic years and a lot might not recover from it.”

‘It felt forced’

Joel Fowler, another business owner in the Moncton area who runs the Xeroz Arcade Bar, said the ultimatum he was presented with during the pandemic wasn’t an ideal one.

“Receiving the massive CEBA loan felt forced. Either take on the large debt or go bankrupt,” he said in a written statement on Thursday.

“Paying it back was very difficult, especially during the mandatory shutdowns issued by the government. Even after restrictions were lifted, it was still a struggle to get a population so used to having to stay home all the time for years come and enjoy a night out.”

Fowler added that due to multiple factors contributing to a decrease in business, he was forced to do side jobs in order to come up with the money to pay back the federal government’s loan.

“I had no choice but to work upwards of 12 to 16 hours (shifts) doing anything I could,” he continued, adding that he washed dishes at a friend’s restaurant along with working bartender and barista shifts at nearby bars and cafes.

“All to just keep myself and my business afloat, all while being extremely limited on when I was allowed to be open and how many patrons were allowed to be inside.”

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